Yesterday our own veritable Brit Ryle told us to expect up to one million job losses as the government updated and reconciled its yearly jobs numbers.
It turns out that the U.S. economy employed 818,000 fewer people than originally reported. I can see being off by a few thousand, or even a hundred thousand. But that’s a big miss.
Yahoo! Finance writes: “The revisions are a yearly practice from the Bureau of Labor Statistics; final revised numbers are expected to be released early next year.
The report, released Wednesday morning, showed the largest downward revisions to the professional and business services industry, where employment was revised down by 358,000 during the period. Leisure & hospitality saw the second-largest downward revision of 150,000.”
The market likes the idea of unemployed people as “bad news is good news” again because it means that rate cuts will come in September…Really…This time for sure.
This is all proceeding as I had predicted a few months ago. Here I said that unemployment has bottomed: https://www.outsiderclub.com/unemployment-rate-has-bottomed/
I wrote about the broken housing market: https://www.outsiderclub.com/the-housing-market-is-broken/.
And seven ominous charts: https://www.outsiderclub.com/7-ominous-market-charts/.
Party Like its 2007
The last time we saw these conditions — the market extremely overvalued, the housing market overpriced and the unemployment rate reversing trend — was 2007. The first chart shows what happened then. The second chart is what is happening now.
As you can see the market hit a new high after the July 17, 2007 top. It peaked in mid-October and then sold off for the next 18 months.
Right now we have a ripping rally from the dip in August 2024. This could continue for the next six weeks or so. But you are playing with fire.
And for the record, I’m not a doom and gloom guy. The last time all the signs were pointing to a correction was at the end of 2017. I wrote plenty of warnings then. It turns out there was a pretty good dip in 2018 but mostly the market went sideways for two years.
That type of thing can happen again. Sometimes a market doesn’t crash, it just consolidates until the earnings catch up with valuations. That said time is money and it equals the same thing. If you put some of your money into a fund or CD paying 4.5% you still get a nice return and will have cash to buy if we do get a significant selloff.
Also, I will remind you that during the winter of 2007/2008, gold and silver went up about 50%, but when the big crash came, everything sold off. When margin calls hit during a falling market investors need cash and they sell good stocks along with the bad.
Put some money in gold and silver now but be prepared to take profits. The real big returns for precious metals – especially the miners happened after the crash.
If you want to trade this market and you know what you are doing you can start buying VIX trading vehicles like the iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX). Just know you will lose all your money if you “buy and hold.” That said, during the selloff a few weeks ago the VXX jumped 125% in four days. Again, not for widows and orphans.
All the best,
Christian DeHaemer
Brit’s piece from yesterday: https://www.outsiderclub.com/gamechanging-data-coming-tomorrow/
The positive spin on unemployment: https://finance.yahoo.com/news/us-employment-falls-by-818000-in-latest-government-revision-144414848.html
Buffett’s value measure: https://currentmarketvaluation.com/models/buffett-indicator.php
Money quote: “The current ratio of 202% is approximately 63.27% (or about 2.0 standard deviations) above the historical trend line, suggesting that the stock market is Strongly Overvalued relative to GDP.”
